Correlation Between TORM Plc and Orphazyme

Can any of the company-specific risk be diversified away by investing in both TORM Plc and Orphazyme at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining TORM Plc and Orphazyme into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TORM plc and Orphazyme AS, you can compare the effects of market volatilities on TORM Plc and Orphazyme and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in TORM Plc with a short position of Orphazyme. Check out your portfolio center. Please also check ongoing floating volatility patterns of TORM Plc and Orphazyme.

Diversification Opportunities for TORM Plc and Orphazyme

0.26

Correlation Coefficient

TORM Plc  Orphazyme

Modest diversification

The 3 months correlation between TORM and Orphazyme is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding TORM plc and Orphazyme AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orphazyme AS and TORM Plc is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on TORM plc are associated (or correlated) with Orphazyme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orphazyme AS has no effect on the direction of TORM Plc i.e., TORM Plc and Orphazyme go up and down completely randomly.

Pair Corralation between TORM Plc and Orphazyme

Assuming the 90 days trading horizon TORM plc is expected to under-perform the Orphazyme. But the stock apears to be less risky and, when comparing its historical volatility, TORM plc is 2.5 times less risky than Orphazyme. The stock trades about -0.45 of its potential returns per unit of risk. The Orphazyme AS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  85,000  in Orphazyme AS on September 14, 2024 and sell it today you would earn a total of  10,000  from holding Orphazyme AS or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

TORM plc  vs.  Orphazyme AS

TORM plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TORM plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Orphazyme AS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orphazyme AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Orphazyme exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TORM Plc and Orphazyme

The main advantage of trading using opposite TORM Plc and Orphazyme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TORM Plc position performs unexpectedly, Orphazyme can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Orphazyme will offset losses from the drop in Orphazyme's long position.

The idea behind TORM plc and Orphazyme AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..